Germany’s economy ministry has proposed to cover 80% of electricity costs for energy-intensive companies until 2030, aiming to support industries like chemicals, steel, and glass. The plan, estimated to cost €25-30 billion, also seeks to reduce EU reliance on China in critical sectors like solar panel and semiconductor production. The move responds to rising competition and subsidies in China and the US.
However, the proposal has sparked opposition within Germany’s coalition government and the EU. Finance Minister Christian Lindner warns that expensive subsidies are inefficient and unfair. Additionally, EU member states worry that Germany’s large economy could unfairly benefit from the shift in European industrial policy.
German industries have complained about high electricity prices, especially after the Ukraine war. Companies like Northvolt and Volkswagen have reconsidered plans to build factories in Germany due to high costs. The ministry’s plan proposes providing cheap renewable energy to industries through fixed-term contracts, but reactions from German industry have been mixed.
THINK LIKE AN ECONOMIST!
Q1. Define the term subsidy.
Q2. Explain one advantage of subsiding an industry.
Q3. Analyse the impact of subsiding electricity on industrial output.
Q4. Discuss whether subsiding electricity is an appropriate method for the German government to stimulate industrial production and increase competitiveness.
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